Goff talks up growth along with cutting congestion and revising funding

As Statistics NZ published its latest migration figures last Friday – a net inflow just 46 short of 70,000, and a net 32,700 into Auckland – new mayor Phil Goff was talking up growth while proposing faster measures to cut congestion, and telling the Government it needs to shift at least some of the financial burden from ratepayer to taxpayer.

The Government has been running a programme to encourage regional economic growth, but not in the concerted way needed to reduce imbalances. And it has done none of the exercise needed to restructure the funding of infrastructure.

The Auckland transport alignment project, between the Government & Auckland Council, is a very tentative step towards part of this necessary revision. But it’s predicated on Auckland continuing to grow apace, it’s a tally of tasks & setting of a priority order.

Transport alignment, and what it’s not about

It’s not about examining Auckland’s apparent needs from a wider perspective – looking at housing not just as a centre-outward programme but as part of the creation of communities & new economic centres, looking at local business as an integral feature of growth instead of being a chance occurrence, looking at access as an efficient way to move between economic centres and between those centres & homes.

Carpeting an overpriced landscape with homes is not the answer to a problem but an escalation of the problem. Growth for its own sake has rightly been characterised as a Ponzi scheme.

Silverdale, in the north of the region, is an example of how improvements to local government can send progress astray. Under the old Rodney District Council, which needed more sources of rates, some of the land now being gobbled up by an expanding Millwater housing subdivision was intended for a business innovation park. A tertiary education relationship would have followed, naturally.

The jobs in Silverdale & Millwater are in shops. The strength of the greater perspective has been defeated.

“Growth is good”

New Auckland mayor Phil Goff.

Mr Goff told the Council for Infrastructure Development (renamed yesterday, now Infrastructure NZ) about his travails on the campaign trail of guessing when he might turn up, because of congestion.

But his central themes were that “Auckland is a great city – that’s why so many people want to live here”, “New Zealand needs a city of international scale”, and “New Zealand needs a major city which can retain the best & brightest of its own new generation and can attract talent from abroad”.

“Growth is good,” he told his infrastructure-oriented audience. Where have you heard a similar phrase, the first word changed?

Mr Goff has 3 central answers. First, the economic imperative founded on growth & skill; second, overcoming the housing price spiral and providing the infrastructure to support it; third, changing funding structures. They all need a lot more work.

“Auckland has to be a centre of learning & innovation,” he said. “It is our best prospect for building a diversified & high technology economy. To attract & retain the talent we need, the city has to provide high paid jobs in high value-add enterprises and also needs to be a good place to live.”

He said local & central government had to work together to address the infrastructure deficit underlying housing unaffordability & traffic congestion: “For housing, there are some issues of demand management which are largely within the scope of central government which could take some of the pressure off. Longer term, it is about increasing supply.

“Around 60% of housing costs are the land, and increasing the supply & better utilisation of land is vital. The new unitary plan, when it is fully implemented, is a big step towards tackling the problem of land supply and therefore cost.”

At that point Mr Goff raised the catch-cry: “We need to go up & out.”

“Up & out” inherently a conflict

Sounds great, but it’s inherently a conflict where pricing is integral. Old Auckland City wanted intensification because it had nowhere to expand, while the rest of the region’s old territorial councils wanted expansion in their areas to improve their economies by boosting their populations.

Without those old boundaries, the reasons for those numbers games change. Suburban intensification can be justified where there is amenity and where work is available at a range of skill levels, so concentration in centres well away from the cbd will then work. Carpeting the landscape without adequate activity centres – jobs, education, sports facilities, entertainment, not just shops – means the dominance of the car will continue.

Mr Goff said reviewing Auckland’s consenting process would be a priority. From the council’s perspective, “we need to have a resource consenting system that is fast, efficient & responsive to the needs of our city while maintaining the integrity of the process”.

Infrastructure funding

But, he said, the bigger problem was the cost of providing infrastructure so land zoned for housing can be developed: “I am pleased that central government recognises the cost of providing infrastructure cannot be funded from the narrow revenue base of rates. Nor can infrastructure needs be funded in local government as they are in central government by simply borrowing & increasing debt.

“Auckland is constrained in its infrastructure investment by the need to maintain prudent levels of debt, in particular in its debt to revenue ratio. Currently, the maximum ratio set by Standards & Poor’s is 270% and Auckland’s current ratio is approaching 250%. Our debt currently stands at $8 billion and will grow by another $2 billion over the next 3 years, and this is within the prudential limit by our credit rating agencies.

“With the need to meet half the cost of the city rail link – some $1.5-1.7 billion over the next few years – Auckland’s ability to take on new debt is constrained.

“Breaking the debt:revenue ratio would put at risk our AA credit rating and potentially add millions to the council’s interest costs. Treasury & central government agencies understand the scale of Auckland’s infrastructure needs, which come from unprecedented growth and the revenue constraints on the city to meet that growth.

“We can look overseas for better models, such as in Sydney, where infrastructure needs are met not just by local government but in large part by the state government, which has broader sources of revenue.

“I welcomed the Government’s announcement of its Infrastructure Fund a couple of months ago. It was an acknowledgement that high growth areas need additional assistance. However, that $1 billion spread over 5 growth areas won’t accelerate housing construction in Auckland to the levels needed to meet housing demand. I also acknowledge that the onus is on Auckland Council to demonstrate to the Government that we have our house in order for extra capital to be made available.”

Failure to solve funding hugely expensive

None of that spiel on infrastructure needs & funding matches what the “out” part of “up & out” will do to infrastructure demand. Auckland needs closer attention given to a mix of public & private infrastructure provision, and particularly to how it’s managed. Management needs to be non-partisan and, while the public sector theoretically has no favourites, it can be extremely partisan & jaundiced.

Funding by the taxpayer is no different from funding by the ratepayer: same pants, different pocket. Upfront funding by the developer adds hugely to cost, as does the uncertainty of how long getting consent will take. Plenty in the public sector continue to regard “the developer” as a greedy parasite, ignoring the cost of uncertainty and the value of that gift of upfront funding.

Those costs feed into land prices and into all inputs of housing. And they feed into the costs of business, and especially into transport.

Mr Goff said congestion was costing Auckland an estimated $1.5-2 billion/year in productivity losses: “Technology such as Uber car sharing & driverless vehicles will help, but we shouldn’t sit back and expect that to be the only solution when our population will grow by another million. Motorway investment can help, but no great city has built its way out of congestion with roads. Cycleways to allow kids to get safely to school could take up to 10% of traffic off the roads during rush hour. Increasing our public transport, heavy & light rail and busways is critical to relieving pressure on our roads, as it is in almost all international cities.

New transport priorities

“The developments we need here are, in many cases, not even within the next 10-year plan, 2018-28. As mayor, I will prioritise the development & signing off of a business case for rapid light rail in the isthmus to bring it into the long-term plan.

“Auckland must also plan for rail from the city centre to the airport, given we have 3.5 million tourists/year, growing to 5 million, and the airport region and cbd are our fastest-growing areas of employment.”

Mr Goff said funding was critical to bringing transport developments forward, but there was a national funding imbalance: “Many Auckland roads, which carry much heavier vehicle loads than roads elsewhere that are classified as roads of national significance, get half the funding of other regions. The city rail link, likewise, gets only 50% funding with the rationale not obvious for this.”

He said Auckland needed a regional petrol tax now and congestion charging later.

It might be unreasonably selective to focus on one speech out of hundreds made over an election campaign and into the start of a mayoralty, but this is when the speeches actually count, and this is when the detail needs to be provided.

About Bob Dey Property

The Bob Dey Property website is primarily about commercial & development property in Auckland, policies & strategies that impact on the sector, listed property securities and wider economic influences. It examines infrastructure, access & urban design issues, and presents ideas from around the world. The emphasis is on appropriate depth & context.